CHAPTER 11
- Chapter 11 cases can be filed by individuals, married couples or businesses.
- Businesses that file Chapter 11 cases have an opportunity to reorganize their debts.
- Debtors in Chapter 11 cases typically manage their own affairs but are required to preserve and protect the assets for the benefit of the creditors. The U.S. Trustee’s office participates in bankruptcy cases to monitor the Debtor’s compliance with the requirements of Chapter 11 and ensure that Debtor’s plan meets the legal requirements.
- Debtors are required to use only file monthly operating reports and pay quarterly fees to the U.S. Trustee’s office
- In many instances, there may be other requirement for the management of the Debtor’s affairs and the use of the Debtor’s assets, including money held by or owed to the Debtor and monies earned from the use of assets that secure debts.
- There is more flexibilility in a Chapter 11 case and the Debtor has a wide range of options for the filing of a plan. The plan must meet a number of requirements on order to be confirmed. Among the requirements is that at least some of the creditors agree to the Debtor’s plan.
- A Chapter 11 provides the Debtor with an opportunity to negotiate with all of the creditors and provides a number of ground rules that establish the relative rights of the parties based upon the value of their collateral and how well they have used the available laws to protect their interests.
- The Chapter 11 plan is not of a specified length. There are requirements for certain creditors as to when they must be paid. For other creditors, the amount of time necessary is agreed upon between the parties. Chapter 11 typically results in a sort of controlled negotiation between the parties with rules determining the respective rights of various classes of creditors.
- Since the process begins with the Debtor providing detailed information about their assets, liabilities and debts. All of the creditors are aware of how each of the creditors is to be treated.
- Often, allowing the Debtor the opportunity to retain its assets and pay reduced amounts to creditors allows for more of a recovery for the creditors than forcing the liquidation of the Debtor’s assets.
- It is very difficult to achieve confirmation of a plan over the objection of a creditor.
- If a Chapter 11 case is not successful, the Judge determines, with input from the creditors, whether the case should be converted to a Chapter 7 case or dismissed so that the Debtor loses bankruptcy protection.
- The attorneys fees for a Chapter 11 cases are much more expensive than for a Chapter 7 and Chapter 13 case and it is difficult to determine in advance the full amount of the fees that will be due. The filing fee for a Chapter 11 case is $1046.00.